10-KPeriod: FY2007

Apple Inc. Annual Report, Year Ended Sep 29, 2007

Filed November 15, 2007For Securities:AAPL

Summary

Apple Inc.'s 2007 10-K filing showcases a company experiencing robust growth and strategic expansion, primarily driven by the success of its iPod and the highly anticipated launch of the iPhone. Net sales increased by a significant 24% year-over-year, fueled by strong performance in Mac sales, particularly portable computers, and a notable 8% increase in iPod net sales. The introduction of the iPhone, while contributing a modest $123 million in net sales for its initial partial year, signals a major new growth vector for the company. Apple's retail strategy continues to be a key driver, with a 27% increase in retail net sales and improved average revenue per store. The company demonstrated improved profitability, with gross margin percentage rising to 34.0% from 29.0% in the prior year, attributed to favorable component costs and higher revenue leverage. Research and development spending increased by 10% to support ongoing innovation, and selling, general, and administrative expenses rose by 22%, largely due to increased sales and retail expansion. Apple ended the fiscal year with a strong cash position of $15.4 billion, providing ample resources for future investments and operations. The company's diversification beyond personal computers into digital music and mobile communication devices is clearly underway, positioning it for continued growth.

Financial Highlights

27 data points
Beta

Revenue

$24.58B

33.2% Gross Margin

Net Income

$3.50B

14.2% Net Margin

EPS (Diluted)

$0.14

Cash & Equivalents

$9.35B

Free Cash Flow

$5.47B

Financial Statements
Beta
Revenue$24.58B
Cost of Revenue$16.43B
Gross Profit$8.15B
R&D Expenses$782.00M
SG&A Expenses$2.96B
Operating Expenses$3.75B
Operating Income$4.41B
Net Income$3.50B
EPS (Basic)$0.14
EPS (Diluted)$0.14
Shares Outstanding (Basic)24.21B
Shares Outstanding (Diluted)24.90B

Key Highlights

  • 1Apple reported a 24% year-over-year increase in net sales, reaching $24.0 billion for fiscal year 2007.
  • 2Mac net sales grew by 40%, outpacing the overall personal computer industry growth, with portable Mac sales showing particularly strong momentum.
  • 3iPod net sales increased by 8%, driven by higher unit sales of iPod shuffle and nano, despite a lower average selling price due to product mix.
  • 4The launch of the iPhone in June 2007 contributed $123 million in net sales, marking a significant entry into the mobile communications market.
  • 5Gross margin improved significantly to 34.0% from 29.0% in the prior year, benefiting from favorable component costs.
  • 6Apple's retail store expansion continued successfully, with net sales increasing by 27% and reaching $4.1 billion.
  • 7The company maintained a strong balance sheet, ending the fiscal year with $15.4 billion in cash, cash equivalents, and short-term investments.

Frequently Asked Questions

The primary growth drivers for Apple in fiscal year 2007 were the strong performance of its Mac product line, particularly portable computers like the MacBook and MacBook Pro, and continued growth in iPod sales, especially the iPod shuffle and nano. The launch of the iPhone also began contributing to revenue, signaling a new significant growth area for the company.

Apple's profitability improved significantly in fiscal year 2007, with gross margin increasing to 34.0% from 29.0% in fiscal year 2006. This improvement was attributed to more favorable pricing on certain commodity components like NAND flash memory and DRAM, higher overall revenue providing better leverage on fixed production costs, and an increase in sales through Apple's direct channels.

Apple's retail strategy continued to focus on expanding its store footprint and enhancing the customer buying experience. The company opened 32 new retail stores in fiscal year 2007, bringing the total to 197. Retail net sales grew by 27% year-over-year, with average revenue per store showing slight improvement. The retail initiative aims to attract new customers and provide a high-quality sales and support experience.

Apple views continued investment in research and development as critical for its future growth and competitive position. In fiscal year 2007, R&D expenditures increased by 10% to $782 million, reflecting the company's commitment to developing new products and enhancing existing ones across its hardware, software, and services portfolio.